When a legal or other IP-related proceeding reaches a conclusion, it is often assumed that the successful party will be compensated for its costs. However, while compensation for a portion of the legal costs can be recovered in some proceedings, this is not always the case. The following is an overview of when legal costs may be recoverable and how much can be recovered.
Litigation
1. Federal Court of Canada. IP litigation, including patent, trademark and copyright infringement actions, are most often brought in the Federal Court of Canada.
In IP litigation in the Federal Court, the successful party is usually awarded compensation for a portion of its legal costs.
The standard costs award in the Federal Court is for "party-and-party" costs. Party-and-party costs are made up of two components: assessable services and disbursements.
The assessable services portion is intended to compensate the successful party for a portion its lawyer's (attorney's) fees. Assessable services are calculated pursuant to a Tariff in the Federal Courts Rules, which provides a range of amounts that can be recovered for assessable services for each step in the litigation.
Disbursements compensate the successful party for various expenses associated with the litigation other than lawyer's fees, such as travel, photocopying, couriers, facsimiles and expert witness fees. The successful party is typically entitled to fully recover all reasonable disbursements, although disputes can often arise as to whether the claimed disbursements are "reasonable."
Offers to settle can have a significant impact on the amount of party-and-party costs that are awarded. For example, if the successful party made a formal written offer that was not accepted by the other party, and the final judgment is more favourable than the terms of the offer, then the successful party is generally entitled to double the normal party-and-party costs (but not double disbursements) from the date of the offer.
Overall, ignoring the impact of any settlement offers, party-and-party costs awards in IP litigation in the Federal Court typically compensate the successful party for between approximately 20 to 40 per cent of the actual cost of the litigation.
In exceptional circumstances, the Federal Court may award "solicitor-client" costs rather than party-and-party costs. Solicitor-client costs are available when a party has engaged in conduct that the Court considers "reprehensible, scandalous or outrageous." Solicitor-client costs may (but do not always) fully compensate the successful party for the actual cost of the litigation.
2. Ontario Superior Court of Justice. Although IP-related disputes are most often litigated in the Federal Court, certain types of IP litigation, including patent, trademark and copyright infringement and passing-off actions, can be brought in the Provincial courts. Certain IP litigation must be brought in a Provincial court, including actions for enforcement or interpretation of a license agreement. In this article, only costs in the Ontario Court of Superior Justice are discussed.
As in the Federal Court, in the Ontario Superior Court of Justice costs are usually awarded to the successful party.
The standard costs award in the Ontario Superior Court of Justice is for "partial indemnity" costs. The amount of partial indemnity costs for a proceeding is generally fixed by the Court upon consideration of various factors, such as the experience, rates charged and hours spent by the successful party's lawyers and the amount of costs that an unsuccessful party could reasonably expect to pay.
In exceptional circumstances, the Court can award "substantial indemnity" costs (similar to solicitor-client costs as discussed above), rather than partial indemnity costs. Substantial indemnity costs are calculated by multiplying the partial indemnity costs that would have been awarded by 1.5.
The Court may also award "full indemnity" costs. Full indemnity costs are awarded only in rare circumstances, such as where the Court considers that justice can be done only by complete indemnification for costs.
As in the Federal Court, formal offers to settle also have a significant impact on costs awards in the Ontario Superior Court of Justice, in appropriate circumstances increasing the scale of costs from partial indemnity to substantial indemnity where a settlement offer is made, but not accepted.
Partial indemnity costs awards in the Ontario Superior Court of Justice are typically higher than party-and-party costs awards in the Federal Court. Although each case is determined on its own merits, some decisions have provided a "rough rule of thumb" that partial, substantial and full indemnity costs will typically represent approximately 60 per cent, 90 per cent and 100 per cent, respectively, of the fees actually being charged to the successful party by its lawyers.
Administrative proceedings
1. Patent and trademark applications. Costs associated with filing and prosecuting a patent or trademark application are not recoverable, including in relation to hearings before the patent appeal board.
However, there can be costs consequences associated with appealing a decision of the Commissioner of Patents or the Registrar of Trademarks in relation to a patent or trademark application to the Federal Court. For example, if the Commissioner of Patents refuses to grant a patent, the decision can be appealed to the Federal Court. In the appeal, costs may be awarded in favour of the Commissioner (against the patent applicant). However, the Patent Act provides that costs cannot be awarded against the Commissioner. Although there is no corresponding provision in the Trademarks Act, the practice is similar – the Federal Court generally will not award costs against the Registrar of Trademarks.
2. Trademark oppositions. Trademark oppositions are administrative proceedings before the Trademarks Opposition Board wherein a party objects to ("opposes") another party's trademark application, and seeks to prevent it from becoming registered. Despite the resemblance of opposition proceedings to litigation, costs are not recoverable in opposition proceedings.
That being said, the unsuccessful party in a trademark opposition can appeal the decision of the Trademarks Opposition Board to the Federal Court. The successful party in the appeal would typically be entitled to recover its costs in relation to the appeal (see the above discussion regarding costs in the Federal Court).
Domain name disputes
The Canadian Internet Registration Authority (CIRA) operates a dispute resolution system for "dot-ca" domain names, which is called the CIRA Dispute Resolution Policy ("CDRP"). Under the CDRP, a complainant may seek to have another person's "dot-ca" domain name registration cancelled or transferred to the complainant.
A complainant in a CDRP proceeding cannot recover its costs regardless of the outcome of the proceeding. However, if the complainant is unsuccessful in the proceeding, and it is established that the complaint brought the complaint "for the purpose of attempting, unfairly and without colour of right, to cancel or obtain a transfer of" the domain name, then the complainant may be ordered to pay up to $5,000 to defray the costs of the domain name owner. Until these costs are paid in full, the complainant cannot bring any further CDRP proceedings.
Conclusions
As can been seen from the discussion above, the extent to which legal costs in IP proceedings may be recovered will depend upon the nature of the proceeding, and the court or tribunal in which the proceeding is brought. In the end, IP owners will always bear some cost burden in association with the enforcement (and defence) of their rights. However, this must always be balanced against the significant benefits that can flow from exclusivity.
The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.